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Friday, January 29, 2010

The Mobile Revolution: More on the iPhone Effect in Korea

As time passes, it becomes more and more apparent that the introduction of Apple's iPhone has sent shock waves through the mobile communications sector in South Korea, revealing some of its salient characteristics. This phenomenon, the so-called "iPhone Effect" deserves a more thorough treatment than in my earlier post. The following are some of my thoughts about the iPhone effect.

The iPhone effect is occurring now only because leading industry and government players chose to ignore the implications of the transformation in mobile communications taking place around the world starting more than two and a half years ago with the introduction of the iPhone. Neither the handset manufacturers, nor the mobile service providers, nor the government seemed very concerned about this until mid 2009. The effect was that Korea continued to pursue an old model of mobile communication, based on feature-phones, while mobile broadband and "apps" were taking hold elsewhere in the world.

It underscores Korea's relative weakness in the development of software and internet content, versus the manufacturing of hardware. LG and Samsung Electronics together command a large share of the world market for mobile handsets, but are relatively weak in the so-called "smartphone" segment (I don't like this term, because the new phones, iPhone and Android, are really hand-computers or hand-broadband devices) show signs of being caught flat footed by the success of Apple's iPhone in the Korean marketplace.

The iPhone effect also highlights the continuing high dependence on (or preference for) Korean language web content, as illustrated by high levels of usage of Naver, a Korean-language service, and relatively low levels of usage of Google. The vast majority of the iPhone and Android apps being downloaded and used around the world are written in English or other languages. The iPhone in Korea is exposing consumers to many of these applications, disclosing a clear "App-gap" with many of the most useful applications not yet available in Korean.

The iPhone effect occurs partly because the Apple iPhone has introduced a multi-touch, capacitive touchscreen that is more than just screen technology. It is a user-interface (UI) that everyone else is copying as we enter this new era of the handheld, internet-connected PC. The iPhone is faster, easier to use and just a bit more intuitive than any of the competing phones on the market today, including Google's Nexus One and, most pointedly, Samsung's local T-Omnia II. In this revolutionary era, the iPhone is setting the standard, much the way that the IBM PC did way back in 1980.

The revolutionary transition in mobile handsets from phones to internet-connected computers is well underway, both in Korea and globally. Given the nature of semiconductors and other components that go into the handsets, it is clear that handsets will soon become a commodity, much like PCs are today, with more or less modular, interchangeable parts. The big money and the major impact of this transformation will be found in software and content. Therein lies the future challenge for Korea.